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Chevron Corp. and two partners said Tuesday that they had tapped a potentially huge new source of oil in the Gulf of Mexico's deep waters, fueling hope that further discoveries in the region could help ease the nation's oil supply woes.
The successful test of one of the deepest oil wells ever drilled showed such promise that some believe the undersea oil pool could rank as the largest discovery of crude since Alaska's Prudhoe Bay began producing nearly 40 years ago.
"An opportunity like this only comes once every few decades," said Daniel Yergin, chairman of Cambridge Energy Research Associates in Massachusetts. "It holds out the prospect that this means more supply, and more supply is good news for consumers."
The geologic formation being targeted by the Chevron group and others could begin producing oil steadily as early as 2012, and could yield 800,000 barrels of crude a day, or about 11% of total U.S. production, according to an August assessment of the region by Yergin's firm.
San Ramon, Calif.-based Chevron, whose partners include Devon Energy Corp. of Oklahoma and Norway's Statoil, wouldn't quantify the size of its find, except to note that the gulf's deep waters could hold 3 billion to 15 billion barrels of oil -- at the high end, a more than 50% boost to U.S. petroleum reserves.
After a year of mostly bad news about oil supplies, investors celebrated Tuesday by sending up stock prices -- including those of Chevron, Devon and Statoil -- and by further trimming the price of oil futures.
Motorists, however, should hang on to their hybrids.
Although the discovery suggests that the undersea region holds more oil than previously thought, experts say the crude will be expensive to extract and years in coming.
What's more, growing demand in the U.S. and elsewhere could quickly eat up the production gains. And there is the uncertainty that comes with trying to figure out how much oil lies so far beneath the surface.
"It's phenomenal, if it's there," said Matthew Simmons, who heads Simmons & Co., a Houston investment bank that specializes in energy. "But until you get a field on production, you don't really know what's there.... It's a roll of the dice."
Simmons said the gulf had yielded several highly touted oil finds over the years that fell short of expectations.
The Chevron project, dubbed Jack, is 270 miles southwest of New Orleans. It is one of a string of oil discoveries made beginning in 2002 in the Lower Tertiary formations off the coasts of Louisiana and Texas, miles below the seabed.